If you are a Grandparent and have been thinking about ways to help your grandchildren save for their future, here are some things you might want to consider.
It may seem pretty obvious but the more money you put into a savings account or investment for your grandchildren the less chance they have of spending it. And, the more chance they have of creating a nice little nest egg for when they hit the heady heights of adulthood.
Children are subject to tax breaks on investments so now it is a good time for you to make a start on their savings, if you can afford it.
There are a number of different routes you can take when setting up investments for children, and each has its pros and cons – so what might work for one person may not for the next.
The most common investments for children are:
Children’s savings accounts
Shop around for a savings account, and check that you’re getting a good rate of interest. Rates vary wildly from provider to provider. It’s possible to earn up to 4.5% interest with a children’s regular saver account. Check out Which.co.uk to find out who is paying the best rates currently.
Junior ISAs (sometimes called NISAs)
The Junior ISA is a permanently tax-free way of saving. It is limited to savings up to £4,368 for the tax year 2019-20. That can be split whichever way you want between the two types of Junior ISAs that are available for children (Junior ‘Cash ISA’ or Junior ‘Stocks & Shares ISA’). Visit Which.co.uk to find out who offers the best ISAs currently.
NS&I Premium Bonds
Premium Bonds have changed in recent years, and whether or not they are still an efficient savings opportunity comes down to your personal taxable income situation. To work out if they are right for you, MoneySavingExpert have created an guide to understanding Premium Bonds.
As interest rates and savings opportunities change on a regular basis, make sure any advice or guidance you take is up to date. Here are a few places that offer up to the minute advice and guidance on children’s savings.
Do remember that any investment you make can go down as well as up, especially when you’re saving over the long term.
Saving £20 a month over 18 years will add up over time. At an average of 2% interest per year, there would be over £5,000 in the savings pot, which could help your grandchild with university costs, driving lessons or buying a car, or even helping towards a deposit for their own home.